flyExclusive, Inc. Class A

Greetings and welcome to the FLY exclusive fourth quarter and full year 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sloan Bowen of Vestal Relations. Thank you, Sloan. You may begin.

Thank you, Matt. Good afternoon, and thank you for joining Fly Exclusive's fourth quarter 2024 earnings conference call. Joining me on the call today is Jim Seagrave, Fly Exclusive's founder and chief executive officer, and Brad Garner, our chief financial officer. We announced 4Q and year-end financial results after the market closed today, along with the filing of our Form 10-K for the year ended December 31st, 2024. We'll be providing certain non-GAAP information during today's discussion. Important disclosures about this information and a reconciliation of the non-GAAP information to comparable GAAP information is included in our Form 10-K, filed with the SEC, and is available on our Investor Relations website. In addition, this discussion might include forward-looking statements. Actual results might differ materially for any number of reasons, including risk factors described in our annual report on Form 10-K. In our quarterly reports on Form 10-Q and in the press release covering forward-looking statements. Rather than rereading this information, we're going to incorporate it by reference in our prepared remarks. And with that, let me turn the call over to Jim.

Thank you, Sloan, and thank you all for joining us today. It's a great way to kick off 2025 by reflecting on a year that fundamentally reshaped our business. 2024 was a year of bold decisions, hard execution, and clear results. We set out with an ambitious plan, and we delivered. When we entered the year, we had just completed our transition to a public company. We were still carrying the weight of 37 non-performing aircraft that had been a drag on margins and operations. We lacked experience, expertise, and leadership in certain areas needed to execute our plan as a public company. SG&A was elevated, driven by the typical growing pains of going public with outside consulting services peaking at over 1.3 million per month. And while our vertically integrated platform was in place, it was not being leveraged. 12 months later, the picture is dramatically different. Let's begin with a fleet refresh because that was the backbone of our strategy. We started 2024 with over 100 aircraft on our certificate, but 37 of those were non-performing aircraft. That's a polite way of saying most of them were losing money. They had a dispatch availability as low as 30%, which made them costly and inefficient to operate. These aircraft were down for maintenance more than twice the time they were available to generate revenue, creating more operational friction than value. These non-performing aircraft represented roughly $30 million in annual EBITDA drag. By the end of the year, we had sold or eliminated 20 of those aircraft. That number continues to improve in early 2025, and we expect fewer than eight to remain by mid-year. At the same time, we began onboarding Challenger 300s and 350s, modern, fuel-efficient, high-performance, super-midsize jets. Their dispatch availability has exceeded expectations, delivering better than 80%, nearly 300% better than the aircraft they are replacing. These jets are better for operations better for customers and better for our bottom line. Each challenger contributes approximately $8 to $10 million in annual revenue and does so at significantly better margins. We ended 2024 with three operational challengers and as of today have five in the fleet. Multiple additional aircraft are in the immediate pipeline and we plan to bring the number up to 15 by the end of the year. Our Citation CJ3 Plus and XLA-S fleet continues to perform extremely well for us, and we will continue expanding these fleets in 2025 to support anticipated member growth. Now let's talk about operations, because that is the core of what makes our business work. With fewer aircraft on certificate, you might assume we'd be flying less, generating less revenue. But in fact, the opposite happened. We flew more. Flight hours increased 36% in the fourth quarter year over year, and hours per aircraft improved significantly. That speaks to both the quality of the refreshed fleet and the strength of our operating execution. We actually grew revenue in 2024 even as we removed 20 aircraft. That's a powerful testament to the strategy and the model we've built and is directly attributable to the great work of our team in operations and maintenance and, of course, to our pilots. We were the third fastest growing private jet operator in 2024 based on flight hours squirmed. And even more impressively, we've been the fastest growing company in the space since before the pandemic with 208% growth in flight hours since 2019. Dispatch availability improved 5% quarter over quarter. That improvement alone represents significant operational leverage. Annualized, that translates into about $15 million in additional contribution margin. At our current size, every 1% increase in dispatch availability adds roughly $250,000 per month, or $3 million a year to the bottom line. That's the kind of operating leverage this transformation has unlocked, and we are not done yet. We also overhauled maintenance operations. Our MRO business isn't just supporting our internal fleet now, it's becoming a revenue driver. In 2024, we grew MRO revenues by 2.6 million and 55% over 2023, serving both internal and external customers. Our paint and interior business, which previously focused on internal projects, now generates more of its revenue from outside clients. These are scalable, margin accretive capabilities that we believe will grow meaningfully in the years ahead. Turning to the customer side, our Jet Club program continues to stand out. Membership grew 26% year-over-year, finishing at 1,195 members. That includes a 19% increase from Q3 alone, adding 190 new members in a single quarter. We focused on Jet Club marketing in Q4, Given the softness in fractional sales tied to tax policy uncertainty and the election cycle, that bet paid off. And just to be clear, even with all the membership growth, our customer-to-aircraft ratio continues to lead the industry. At 10.5 members per aircraft, we provide guaranteed access with unmatched service. Some of our competitors have 30-plus customers per aircraft. That model simply doesn't deliver the same experience, and customers know it. As we continue to grow the fractional and jet club lines of business, we expect to ultimately settle around 15 members per aircraft. On the fractional side, we ended 2024 with 131 shares sold, up over 100% for the year. And while Q4 sales were slower than expected due to external factors, Our pipeline remains strong, and we anticipate many of those delayed decisions converting in the first half of this year. Our wholesale and retail sales teams did an incredible job delivering record revenue of 20% year over year in the face of a smaller fleet, a great validation of our market strategy, product delivery, and sales execution. On the financial side, the numbers speak volumes. Gross profit for Q4 was nearly 16 million, up 300% from the same quarter last year, and up 88% from Q3. Gross margin improved to 18%, up over 200% from the first half of 2024, and up 64% from Q3. Adjusted EBITDA loss narrowed to 6 million, a dramatic improvement from the $19 million loss in Q1, and improved from a $10.3 million loss in Q3. We also brought SG&A under control. As I mentioned, we were spending over $1.3 million a month on outside consulting in Q1 and Q2. In Q4, it averaged below $50,000 per month and has remained at or below this level so far in 2025. SG&A as a percentage of revenue fell from 31% in Q1 to 27% by Q4. That's a significant improvement in cost discipline and operating leverage that translates to over $14 million in annual savings. We have also identified another potential $1 million per month in continued additional cost optimization initiatives that we are implementing now and expect to realize over the balance of 2025. Our revenue generated per SG&A employee increased nearly 50% year over year from roughly 103,000 per person up to over $147,000 per person per month. We also reduced the total number of SG&A employees per aircraft from a peak of over three down to just 2.4 today, a 60-person reduction with a goal of ultimately getting it down closer to two people per plane in 2025. Our liquidity position improved by $16 million in Q4 as we ended the year with $29 million in cash. We have been intentional and disciplined about how we have funded our fleet refresh, primarily through fractional share proceeds and strategic aircraft disposal. Looking ahead, we anticipate incremental liquidity from increased velocity and fractional sales and the pending JetAI merger transaction, which we view as a source of capital flexibility continued growth investment, and further leveraging our operational platform. On the strategic front, 2024 was a breakout year. Our agreement with Philado brought nearly 200 new members into our ecosystem and validated our ability to scale. We integrated their fleet, absorbed their customers, and delivered a better experience, using 80% fewer employees than they needed before. That's the advantage of our vertically integrated platforms. The proposed jet AI merger is the next evolution of that strategy, bringing capital, a complimentary fleet, and additional customers into the fly exclusive family. We also launched JC25, our newest club program that now includes our super mid category, guaranteed continued access, simplified pricing, a streamlined contract, and better flexibility. Early adoption has been strong, and we expect this to be a growth driver throughout 2025. I'd also like to acknowledge the incredible leadership team we've built. In 2024, we restructured, recruited, and or onboarded new leadership across the company, including the chief financial officer, chief operations officer, senior VP of technology, and the director of internal audit, while also redeploying existing talent into key roles of chief commercial officer, chief accounting officer, and chief accounting officer. We stood up a new internal finance function, established SOX compliance protocols, and have filed every SEC report on time since we put this leadership team in place. This was no small task, and the team executed with excellence. I could not be prouder of the professionalism, accountability, and resilience that this team brought to the company. And all of this was accomplished at far less cost than what we experienced in the first half of 2023 relying heavily on outside consultants. We also rolled out a comprehensive safety management system, reinforced our minutes matter operational philosophy, and passed an Argus audit with flying colors, receiving the platinum rating. The company is also Wyvern and is Bayo certified, all industry leading independent outside firms that have audited and approved our systems and procedures. Safety and culture remain the bedrock of our company. Let me take a moment to walk through the biggest accomplishments of the year, each one a reflection of the day-to-day execution and hard work from our team. This is how we transformed our business last year. We delivered $91 million in Q4 revenue, up 20% year over year, even while operating a 17% smaller fleet. Flight hours rose 36% in the fourth quarter versus last year, driven by stronger utilization and improved dispatch availability. Membership in our Jet Club jumped 26% over the year to 1,195 members. We removed or sold 20 of 37 non-performing aircraft in our fleet and added three challengers with over 80% dispatch availability. Margins expanded to 18% in Q4, up from 11% in Q3, and just 8% in the first half of the year. Adjusted EBITDA improved from a $19 million loss in Q1 to just a $6 million loss in Q4, a huge step forward, and we expect this trend to continue. SG&A dropped from 31% of revenue in Q1 to 27% in Q4. This increase in revenue per SG&A employee up 50% over the year speaks to how much more productive and efficient the team has become. and we cut outside consulting from 1.3 a month to under $50,000 a month at the same time. We ended 2024 with $29 million in cash, even after reducing accounts payable by $14 million from its peak mid-year. We onboarded nearly 200 Bellotto customers and signed a merger agreement with JetAI to expand our capital base and customer reach. We built out a senior team in finance, tech, sales, marketing, and operations. We implemented SOX controls, launched SMS, and passed audits from Argus, Wyvern, and Isbeth. All of this happened in a single year, an incredible testament to the passion, drive, and execution of this team. Now we turn the corner and focus on 2025. Let me walk through a few things I'm excited about as we look ahead. We are on track to complete the removal of the remaining non-performing aircraft, with fewer than 12 expected to remain by the end of Q1. We plan to grow our Challenger fleet to 15 by year end, further improving dispatch availability and enhancing the customer experience. And from a revenue standpoint, each Challenger generates between $700,000 and $800,000 per month at attractive margins. We continue to drive more revenue per SG&A employee, targeting two SG&A employees per aircraft by the end of 2025, making our operation leaner and more scalable. We expect a 15% improvement in dispatch availability in 2025, driven by continued improvement in operations, the addition of more reliable aircraft, and the elimination of non-performing aircraft. With policy uncertainty fading and tax law clarity improving, we expect to convert many of the delayed fractional sales from last year in the first half of this year. Early momentum in the Jet Club program is strong, and we expect this to be a recurring revenue driver throughout 2025. We now meet the Russell 2000 Index Fund eligibility requirements with adequate public float, stock price, and market capitalization, and anticipate potential inclusion in June of this year. Also in June, we expect to become shelf eligible, giving us greater flexibility in future capital planning, allowing us to pay off existing expensive debt, and continue funding our growth organically and through opportunistic acquisition. In Q2, we anticipate closing a financing facility with North Fork Capital to support the acquisition of multiple additional Challenger jets and two new Citation XLS aircraft, while also unlocking significant equity currently tied up in our fleet through refinancing using this facility. With a refreshed fleet, a more efficient organization Increasing recurring revenue from our Jet Club and fractional programs and a clear path to profitability, we are set up to deliver sustained EBITDA and free cash flow growth in 2025 and beyond. To our investors, customers, and team, thank you. Your confident support, and in the case of all of our team members, your hard work and diligence made this transformation possible. And to our sales team, pilots, technicians, and frontline employees, You are the heart of this company. Your professionalism, hustle, and pride in the Fly Exclusive brand are what set us apart. With that, I'll turn it over to Brad to walk through the financial details in more detail.